Am I being a fuddy duddy?

Question

My wife and I just recently started our search for an investment property. We originally wanted a property in Libertyville, IL, but it went too quickly and then one went on the market in Vernon Hills. Our agent contacted the seller's and they said you can see the place, but need to make an offer the following hour because they were calling highest and best. We made our offer, lost out. Then got contacted because the first offer fell through. I was really happy because it was the price we wanted and a solid location with ok cashflow (I think). We then got the contract back with the HOA fee "corrected" up $20/m and disclosure forms which were backdated 2 months ago- way before the place was even listed. From my back of envelope calculations the HOA increase was basically increasing the cost of the property $3000 if that monthly expense was part of the mortgage P&I.

This completely rubbed me the wrong way. When the agent called for highest and best, that was my highest and best. Do they always come back with additional cost? Also is there any reason why they would backdate the disclosure forms? They signed the contract no problem.

Maybe this is how the sausage gets made, but as a first time investment buyers my wife and I were caught off guard, and decided the deal wasn't for us. We are continuing the search, and just wanting to get some other opinions.

Thank you all.

This completely rubbed me the wrong way. When the agent called for highest and best, that was my highest and best. Do they always come back with additional cost? Also is there any reason why they would backdate the disclosure forms? They signed the contract no problem.

Maybe this is how the sausage gets made, but as a first time investment buyers my wife and I were caught off guard, and decided the deal wasn't for us. We are continuing the search, and just wanting to get some other opinions.

Thank you all.

Drew Gedemer · Answer

HOA is likely going to always go up, which is unfortunate.  Depending on the cash flow you calculated, I don't think I'd let 20$ stand in the way of me grabbing the property.

Our Lake County market seems to be really seller strong still, unfortunately.  Even when I'm taking a look at foreclosures, people are bidding them higher than what I am willing to pay.  Best to be patient for the right property.

I talked with 2 people last week at our local meet up that had some properties they were going to sell.  PM me if you want their contact information and the details.

Zack Karp · Answer

@Peter Murphy it was most likely just an honest mistake by the listing realtor.  I see many mistakes with listing data...wrong HOA amounts, outdated property taxes, wrong square footage...all sorts of errors, all the time.  There are some meticulous realtors out there, but many simply are not.

Point is, don't let the mistakes of one realtor or transaction derail you.  Always be sure to do your due diligence, and if the numbers are good for you, don't be afraid to pull the trigger.

Best of luck!

Bob B. · Answer

I would not let the $20 a month stop me from buying a "good" property at a below market price.  Realize, just because someone has a Realestate license, it doesn't mean they have all their ducks in a row.  Get the HOA disclosures and understand what you are getting yourself into before the DD is up. Trust but verify.

Account Closed · Answer

@Peter Murphy

Be happy it's only a slight HOA increase at $20/mo and not a condo's "special assessment fee." My monthly HOA fee has never gone up, but instead the association said they are charging me an extra $1,870 special assessment fee annually for the next 3 years ($5,610 total) so they can replace the roof and siding.

Condo's can be a PIA. You can also ask your realtor for the condo's financials.

Tim Herman · Answer

@Peter Murphy The disclosure documents are done when they anticipate listing the property. I just looked at a property where the seller disclosure documents were from last year, I don't think they were backdated. If there were any changes then that should have been noted.

Lydia S. · Answer

@Peter Murphy

HOA dues are not factored into a mortgage and are paid separately, so they shouldn’t cost you more than whatever the HOA charges.  Of course their fees are subject to change in the future and perhaps recently saw an increase.

Peter Murphy · Answer

So it sounds like it's a pretty resounding "Yes" to the fuddy duddy question regarding the HOA dues. My agent said the same, saying they would feel nickle and dimmed if I went back. Which I imagine would be true because that is exactly how I felt. Also the backdated disclosure documents didn't sit well with me. My agent again stated that would be all handled during the due diligence part. To fit the name of fuddy duddy, I had a hard time seeing why that couldn't be corrected before.  Just seems like there is a lot of leniency regarding the creation of a contract.

Although we ended up walking away, this was a great opportunity to get a true gut feel of my risk tolerance, expectations, and simple lessons learned. This is no substitute to actually going out there and doing, hopefully the next time comes out with a better conclusion.

@ThereaHarris I was referring to if the HOA dues were part of the house price instead of a separate assessment, the amount increase to my loan payment would be about $20 a month. I absolutely agree that the questionnaire and other documents are important, and understand the dues are not a fixed amount and generally don't go down either.

Theresa Harris · Answer

I'm not sure how $20 a month translates to $3000.  HOA fees can go up annually just like other expenses.  Read the HOA rules and documents to make sure it is has money in reserves, handle their money well and you are okay with the rules.

Am I being a fuddy duddy?

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